Private Equity Could Be Plan B for Walmart if Asda Sale is Blocked

Competition regulators are considering the merger of Asda with Sainsbury's


By Carol Ryan, Private Equity News

February 4, 2019†


Walmart Inc.ís tidy-up of its overseas empire will hit a rough patch this month if regulators block the sale of its U.K. unit to a competitor. Fortunately, though, the division could still attract a private-equity buyer.


Chief Executive Doug McMillan is rethinking the U.S. retailerís sprawling international operations, which span 27 countries. Rather than opening its own stores overseas, Walmart wants to become a controlling shareholder in strong domestic players. The companyís $16 billion investment in Indian e-commerce company Flipkart last May is a good example of the fresh approach.


Walmart also has to become shrewder about where it allocates capital as it goes head-to-head with Amazon. That means getting out of countries that arenít performing or that generate low returns. Walmart offloaded an 80% stake in its weak Brazilian business last year.


Next up is the U.K., one of the toughest grocery markets in the world. Walmart said last April that it would merge its chain of Asda supermarkets, which it has owned for two decades, with Britainís second-largest grocer, Sainsburyís. In exchange, it will get a 42% stake in the combined business. It will have the right to sell out after four years.


Britainís grocery sector is already controlled by...